According to Reuters, the Central Bank of India, a state-owned commercial bank, plans to close 13% of its branches in order to strengthen its financial condition, which has been under pressure for several years.
According to a copy of a document acquired by Reuters, the bank intends to cut the number of branches by 600 by closing or combining loss-making operations by the end of March 2023.
RBI ACTION
Central Bank, along with a slew of other lenders, were subjected to the RBI’s prompt corrective action (PCA) in 2017 after the regulator discovered that several state-run institutions had violated its regulations on regulatory capital, bad loans, and leverage ratios.
Since then, all lenders have strengthened their financial condition and have been removed from the RBI’s PCA list, with the exception of the Central Bank.
The bank is battling to exit the RBI’s PCA owing to low-profit performance since 2017 and to use people in a more efficient and effective manner,” according to a memo sent out by the headquarters on May 4 to other branches and divisions outlining the rationale for the move.
A bank subject to PCA is subject to increased regulatory monitoring and may face lending and deposit limits, branch growth and employment freezes, and other financing restrictions.
The RBI implemented these guidelines at a time when Indian bankers were dealing with unprecedented volumes of distressed assets, pushing the RBI to tighten thresholds.